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OpenInvest finds its buyer

The proprietary technology provider will use a capital injection from an existing investor to take advantage of regulatory tailwinds set to push the wealth management industry forward. Staying profitable in the interim will be key.
Industry

Fintech OpenInvest will continue to provide services after existing investor Tayside Group – the family office of the Smith family, which runs one of Australia’s largest food services businesses, PFD – agreed to a further capital injection.

In November the managed portfolio wealth administration platform was put on the market by corporate advisory Acova Capital after it failed to remain profitable in a wealth management industry down 40 per cent on numbers since 2017, when OpenInvest was founded.

Several bids were lobbed for the business, including one from superannuation platform Superhero. According to a media release, the “long-term financial backing and support” offered by Tayside was the preferred option.

  • The news will come as a relief to the 30 or so advisory groups using OpenInvest’s proprietary technology, which enables firms to create white-labelled version’s of its platform so clients can directly invest in managed funds. These firms include advice group Hamilton Wealth, accounting and financial services firm Kelly+Partners and private wealth manager Collins House, as well as Blackmore Capital and SG Hiscock. 

    For many of these firms, the OpenInvest platform provides a way for accumulator clients, plus the children of wealthier pre and post retiree clients, to access managed investment options digitally and without having to meet a $20,000 to $50,000 entry point.

    Its survival should also relieve anxiety levels at Pinnacle, the fund manager stable which tipped in $3 million worth of early-stage funding.

    Built for scale

    Despite its promising use case, OpenInvest has struggled to gain enough traction to remain profitable. The Hayne Royal Commission and a tough regulatory environment have seen adviser stocks decimated in the last 5 years, while managed funds have largely continued to underperform.

    Change is in the wind for advisers, however, with the Quality of Advice Review’s recommendations set to free up the regulatory environment and smooth the path for OpenInvest’s primary distributor group.

    According to OpenInvest founder and chief executive Andrew Varlamos, these recommendations – which include stripping back compliance and allowing institutions to provide a second tier of simpler advice – should provide a massive tailwind.

    “The Government’s response to the QAR signals a commitment to provide a simpler regulatory framework that will encourage major financial institutions to step in and help address the huge advice gap in this country,” Varlamos tells The Inside Adviser.

    Landing one of these institutional clients is exactly what Varlamos had in mind when he said the fintech was looking for “an owner with a bigger balance sheet” last month. “We’re built for scale so we can service the top 100 to 200 brands in the country; wealth managers, advice firms, stockbrokers and online brokers, even banks.

    “We are, in this country, finally on the verge of major change in how a range of providers utilise the internet to reach and assist the retail customer,” Varlamos added. “Everything is going to change very quickly.”

    Regulatory reform in financial services, however, is notoriously slow. Financial Services Minister Stephen Jones only proposed the amendments a few weeks ago, and he has a history of conducting multiple and lengthy consultations before putting final legislation forward. It could be two years before the first institutional provider gets involved.

    The ability of OpenInvest to make things work in the meanwhile, then, and enlarge its footprint in the existing advice landscape, will likely prove as important as its ability to capitalise on these longer-term changes.

    Tahn Sharpe

    Tahn is managing editor across The Inside Network's three publications.




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